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As Ontario gets going on its plan to set up a supplementary pension plan, in Britain a similar plan for middle-income workers has already been launched.

South of the border, a proposal that would supplement U.S. Social Security was laid out by Iowa Senator Tom Harkin in February and is in the early stages of debate. Harkin’s plan would cover 75 million Americans without any pension at all.

It’s no coincidence these plans are bubbling up now, as policy-makers have one eye on the Baby Boom and the other on young people entering the workforce. The former aren’t going to benefit much from these supplementary pension plans — it’s too late. It’s the latter and those in mid-life who will be the winners.

“We have a retirement income crisis,” says Murray Gold, a partner with Toronto law firm Koskie Minsky, and one of eight advisers, including former prime minister Paul Martin, helping the Ontario government with its plan.

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Gold says the initiatives address a pressing problem: How to ensure older citizens have a secure future, while giving young people help getting started.

“We have to get our heads around this together,” Gold says. “We know people aren’t saving enough because it’s difficult and it takes a lot of discipline. It’s really something we’re better equipped to do collectively rather than individually.”

The lack of savings is part income squeeze and part lack of will. A law of behavioural economics predicts that when faced with consumption now and a reward 40 years from now, many will fill the immediate need at the expense of the longer-term one.

Voluntary plans like RRSPs and TFSAs, which use tax incentives to spur savings, show how well the law works. Canadians have left most of these tax breaks on the table.

Tax free Savings Accounts were introduced in 2009. You can put $5,500 a year into an account where the money grows tax-free forever. But as of 2013, only a third of eligible Canadians had opened one. Of those that did, the average inside was $7,500, about 30 per cent of the available room. Some 94 per cent of RRSP room is unused.

At the same time we are living longer. A woman who is 60 this year can expect to live to 89, according to the Canadian Institute of Actuaries, whose mortality tables set the bar for large pension funds. A man who is 60 can expect to live to 87. The BMO Wealth Institute said in July there will be 78,000 Canadians over the age of 100 by 2061. There were 6,000 in the 2011 Census.

The trends “raise a profound public policy question,” pension expert Keith Ambachtsheer wrote recently. Ambachtsheer, a director of the Rotman International Centre for Pension Management, is also on the Ontario pension advisory committee.

“There is a growing consensus that doing nothing is no longer a defensible option,” he said.

The Ontario Retirement Pension Plan (ORPP) will launch in 2017 and is aimed at three million, middle-income workers who do not have a company pension. They will be required to contribute 1.9 per cent of their annual earnings, matched by their employer, to a maximum income of $90,000 a year. It will be similar to the Canada Pension Plan (CPP) in that you cannot opt out.

A $90,000 earner would pay about $142 a month and after 40 years at the maximum get $1,068 a month, about the same as the CPP maximum. (A reality check here: While Ontario budget documents quote the maximum, for most people it’s unlikely. Only 10 per cent of Canadians get the maximum CPP benefit. The average is about half of the maximum.)

The U.K. NEST program — National Employment Savings Trust — started in 2012 with large employers. It will eventually enrol nine million workers. It has an opt-out provision, but Ambachtsheer says only about 8 per cent have withdrawn. These are mostly high-income workers, nearing retirement, who have little to gain from the plan.

NEST is managed at arm’s-length with a board of trustees answerable to Parliament. Members can choose to put their money into one of several funds. Average fees are about 0.5 per cent of assets, versus an average of about 2 per cent for mutual funds.

Harkin’s plan would be mandatory for companies with more than 10 people. Both employees and employers would contribute and the money could be directed into one of several privately run funds.

Many questions face the Ontario plan. There’s one of fairness as it relates to small businesses. They are employers and employees. Will they pay twice? It could also hurt low-income Ontarians who would pay little into it and get very little back. There’s also the cost of setting it up. The cheapest way is to use the administrative machinery of CPP, but the Conservative government is not interested in helping Ontario do this. It believes the voluntary plans are good enough.

Ontario, like others, has found the will to change things. Finding the way may be the difficult part.

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